Some products may be inferior to those of a corporation’s competitors but are chosen by consumers for compatibility: they are de facto standards within an industry or region. Consumers are formally free to use competing products, which may even attract substantial documentation and other support, but in practice are strongly inclined to use the same product – inferior or otherwise – that is used by their peers.
Litigation in the US and EU against Microsoft involved claims that the corporation was abusing its market dominance – most personal users and many corporate users of “office” software rely on Microsoft – by making it difficult to instal a non-Microsoft web browser.
Testimony in the litigation demonstrated that Microsoft was indeed seeking to disadvantage Netscape as a competitor and had sought to inhibit the growth of Apple, its major rival in the personal desktop software market. Netscape has now disappeared. Google enjoys a dominance in search that rivals Microsoft’s “ownership” of word processing or and the position of SAP and Oracle in enterprise computing. It doesn’t have a formal monopoly (many people use “alternative” browsers such as Firefox and Google’s Chrome).
It has accordingly argued that it dominates its markets because it is better rather than because it is bad. In practice, however, “search” for most people means Google, and the corporation accordingly leverages its position through expansion in software and hardware.
What’s the best response when wealthy corporations engage in price gouging (goods/services are egregiously overpriced but the consumer is locked in) or stifle competition and thereby eliminate benefits attributable to innovation?
Those questions are not new. They underpin, for example, criticism of patent law over the past 130 years. Answers aren’t easy. One response has been for regulators to leave the market alone, on the basis that monopolies foster competition that benefits specific consumers and the economy at large. Only a handful of large corporations have survived for more than three generations and as the recent unbundling of News Corp demonstrates even dominant enterprises may shrink or disappear.
Another response has been vigorous enforcement of existing law through litigation against cartels (evident in action by the ACCC) or more broadly against “anti-competitive behaviour”. Governments and educational institutions, as leading consumers, have paid lip service to encouraging market diversity through use of open source software, but in practice rely on the usual suspects such as Microsoft. A more effective response – and why the EU penalty is significant – is to articulate clear competition policies and then insist that corporations abide by them.
Competition policy is a creature of fashion and ideology. We no longer break up monopolistic enterprises such as Standard Oil or IG Farben. As in the case of the unsuccessful anti-trust action against IBM, we are reluctant to tie them up in red tape pending the emergence of real competitors. We can, however, use administrative sanctions, such as the EU penalty, to encourage compliance with promises.
This article first appeared on The Conversation.
